Correlation Between Laurentian Bank and Canopy Growth

Can any of the company-specific risk be diversified away by investing in both Laurentian Bank and Canopy Growth at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Laurentian Bank and Canopy Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Laurentian Bank and Canopy Growth Corp, you can compare the effects of market volatilities on Laurentian Bank and Canopy Growth and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Laurentian Bank with a short position of Canopy Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Laurentian Bank and Canopy Growth.

Diversification Opportunities for Laurentian Bank and Canopy Growth

-0.73

Correlation Coefficient

Laurentian Bank  Canopy Growth

Pay attention - limited upside

The 3 months correlation between Laurentian and Canopy is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Laurentian Bank and Canopy Growth Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canopy Growth Corp and Laurentian Bank is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Laurentian Bank are associated (or correlated) with Canopy Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canopy Growth Corp has no effect on the direction of Laurentian Bank i.e., Laurentian Bank and Canopy Growth go up and down completely randomly.

Pair Corralation between Laurentian Bank and Canopy Growth

Assuming the 90 days horizon Laurentian Bank is expected to generate 0.47 times more return on investment than Canopy Growth. However, Laurentian Bank is 2.14 times less risky than Canopy Growth. It trades about 0.05 of its potential returns per unit of risk. Canopy Growth Corp is currently generating about -0.36 per unit of risk. If you would invest  2,840  in Laurentian Bank on September 22, 2024 and sell it today you would earn a total of  43.00  from holding Laurentian Bank or generate 1.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Laurentian Bank  vs.  Canopy Growth Corp

Laurentian Bank

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Laurentian Bank are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Laurentian Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Canopy Growth Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canopy Growth Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Laurentian Bank and Canopy Growth

The main advantage of trading using opposite Laurentian Bank and Canopy Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Laurentian Bank position performs unexpectedly, Canopy Growth can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Canopy Growth will offset losses from the drop in Canopy Growth's long position.

The idea behind Laurentian Bank and Canopy Growth Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.